ATHENS/BERLIN EXCLUSIVE: Slog prediction vindicated as leaks about special deal start appearing.

Finance Grump…Greek escape

Sources in Berlin and Paris were making it clear last night that, whatever emerges from the Merkel/Samaras meeting in the German capital tomorrow, a deal is already on the table. The task of Antonis Samaras is to prove he is willing to honour that deal – in every sense of the word – not to do the impossible being requested in public by German politicians.

Eleven days ago, The Slog posted that relations between Greece and the Troika had relaxed because, as a high-level Athenian source alleged:

“Something has been agreed, and whatever it is has made the bondholders and the Troika irrelevant overnight. There are half-hearted references to repayment schedules, but they don’t have that sense of panic evident just a few short weeks ago. But you can see that Samaras is now pushing for more austerity progress.”

The piece continued: ‘A deal has been done to pay off bondholders and forgive the residue of the debt…Somebody, somewhere in Europe flicked a switch within the last ten days, and everyone relaxed….Brussels or Berlin…or both…or others…have given Samaras a big reassurance that if he sticks with the [austerity] programme, Greece will not be thrown out of the euro. Those same people have given similar assurances to the key players in the IMF and bondholder groups…that if they take another haircut, the EU will pay off the balance and give them their money back…It is becoming increasingly potty to stick with the view that nothing is going on here.’

Trusted sources have stuck with that view, and seemed more certain last night than the week before last. And now leaks are beginning to appear in the influential MSM titles around the globe: said Bloomberg late last night (BST), ‘…officials look for ways to stave off an immediate crisis…[including]….front- loading aid payments to Greece to help it over liquidity hurdles; lowering the interest rate or extending maturities on loans; and pushing for a second debt writedown, this time focusing on bonds held by public institutions, notably the European Central Bank…’

Further, while Jean-Claude Juncker sprayed out some more bombast yesterday –  telling the Greeks they have a “last chance” to avert bankruptcy – German officials specifically were briefing to the effect that if Greece wants more time, it “could receive concessions if it demonstrates a desire to achieve its main bailout goals”.

And of course, Herr Miserable Schäuble got himself a world media splash yesterday by saying ‘more time’ wouldn’t solve Greece’s crisis. (As always with Wolfie, he didn’t elucidate what would.) But the truth is – as The Slog has contended for some time – that the EU economy couldn’t stand a mess right now, and Greece’s geopolitical hand is too strong to risk chucking Athens out of the eurozone. This focus too is reflected on the front pages of French and German MSM titles today: most German newspapers are concerned with the German economy (still growing) and investment in education. In  turn, key analyst group Markit announced today that “…the July and August readings would historically be consistent with [eurozone] GDP falling by around 0.5%-0.6% quarter-on-quarter.” In the French press, there’s been a  concerted campaign against Francois Hollande over the last few days from both Left and Right: ‘Where are the promises?’ ‘Government under fire’ and ‘100 days of doing nothing’. Not a peep about any ‘eurozone crisis’.

OK: the unvarnished truth was given to The Slog on 13th August as ‘pay off bondholders and forgive the residue of the debt’. What is being floated in the financial press right now is ‘front- loading aid payments to Greece to help it over liquidity hurdles; lowering the interest rate or extending maturities on loans; and pushing for a second debt writedown‘. Ignore the words and extract the kernel of reality:

1. Front-loaded aid = cash = available immediately to pay off debt…plus further help from reduced rates. If this isn’t debt forgiveness, then the Pope is a Muslim.

2. Extending maturities on loans = more time.

3. A second debt writedown = haircut = main creditor is the ECB. ECB forgives the debt, and prints some more euros to pay itself back. See also this conclusion from my original posting: ‘I don’t know for certain: but logic points the finger at Mario Draghi.’ Well of course it would: Signor Dragi can, should he wish, do pretty well anything he wants…and he has.


Except for on small  problem: even after all this has been agreed in a last-minute cliffhanger, Greece is still going to need Bailout III before too long.

At which point, Athens will get The Spanish Deal: a full bailout, called something else.

But when that happens, will the Germans still be in there and fighting? I continue to have my doubts.


63 thoughts on “ATHENS/BERLIN EXCLUSIVE: Slog prediction vindicated as leaks about special deal start appearing.

  1. Hmmm…Off topic – Just been over to the Telegraph and under Johns comment is the ever famous Euro-troll Chelyabinsk.

    Wonder if he’s been a-trolling this site….

    Anyhow…good article John.


  2. Great piece – and yes you were in front of the MSM curve.
    But, JW, you overestimate the Germans’ willingness to overthrow the Merkel line of giving in grudgingly to the Greek need for more funds and a stretched deficit reduction programme. The line is after all supported by the main SPD-Green opposition and there is no German equivalent to UKIP for dissidents to rally round..
    Ultimately, however financially costly, Merkel speaks for Germans when says:
    “In the European Union, “it’s not just about economic questions, but about deeply political questions and thus also about the future of Europe as a whole,” Merkel said in Moldova. “That’s the spirit with which I approach talks with the French president as well.”


  3. I think its worth stressing that the majority of Greeks desperately want to remain in the Euro Zone. Which is why their leaders of the day reach for the vaseline every time the Troika appear.
    In which case the push has to come from outside Greece…and no one wants to go down in history as the bad guy.
    Its all about ego with these people…the rest is smoke and mirrors.


  4. Whatever this might mean in the short term, it won’t change anything in the long term, will it? As JW says, Greek bailout III is already on the cards. What then?


  5. From reading your blog, and other stuff as well, it is now clear that Greece will remain in the eurozone – if it was going to either go or be pushed out that would have happened by now. We are watching an elaborate euro-pantomime, a la Bismarck. Money will be printed in dribs and drabs when absolutely necessary but the screws will be tightened remorselessly until Spain and then France are under the control of the commissars from Brussels/Berlin. And then? The political project will be achieved .It seems a classic situation, as outlined by communist philosophers, where a crisis has been used to achieve a political end. There is no significant opposion, political or philosphical, in any European country (except the UK, so far) – the remorseless brainwashing which has accompanied the development of the eurozone has been implanted in every European brain. Perhaps we should be grateful for our ineffectual education system!


  6. The ECB = STUMP UP UK? Price hike in petrol and domestic fuel bills = more VAT=More EU money= more….ah I can’t be bothered anymore… just take my wage packet and fkoff!

    So, an essay in 1000 words: why Greece is important to Europe. You can use words like: Stratigic military position, Bankers loving debtors (at high interest rates ofcourse) because it has nice places to visit on holiday…
    It is a bit like plying an alcoholic with endless flow of drink whilst complaining about your quality of life and the destructive impact on life for those who 1. pay for it but who can ill afford it 2. have to pick up the pieces of shattered lives 3. listen to PC bullsht about hugging vunerable people who can’t (won’t ) help themselves to get fit.

    Let Greece Go… let it die a little, then watch them struggle to stand back up…or sink, whichever the people decide to do as a nation. It is depressing watching them being dangled like puppets on a string on the world stage. “They will bring you to your knees” is what I heard long ago, regarding political decisions on Welfare and NHS. Oh look how that panned out! Break out Greece!! run as fast as you can and never look back….


  7. Ok I need some help from you folks with a finance back-ground here….If the ECB starts printing serious amounts of Euros to bale out Greece (then shedloads more for Spain etc) then apart from a nasty bit of inflation in Germany, Finland etc, surely the main effect will be that EZ imports become more expensive but exports cheaper? That surely helps Europe North but does nothing for Europe South that does not manufacture lots of stuff it needs to import……or does not have the wherewithall to make.

    Printing shedloads of Euros does not sound good for the UK industry… surely Uncle Merv would start printing Sterling like hell to keep up (excuse of stimulating our economy ( HaHa ) etc)…..then the US would not want to be left with a high doller messing with thier exports …so don’t the Fed use the ‘opportunity’ to print and try to make Barry O look good for Nov ……Then China would not want to loose its artificially low currency….so might not a bit of printing to soften their landing might be a good plan for them ?….then Japan, Russia, India, Brazil etc.

    There has to be a flaw in my logic….surely? PLEASE ! …otherwise……If everyone worldwide prints money to avoid being left holding an uncompetative currency rate then surely nothing is achieved other than what could have been achieved by all round debt forgivness…but what printing will have done is to leave a gaping hole in my pension and savings along with every other saver or pensioner in Europe / worldwide….and still it would have done nothing to fix the fundamental EZ Euro North / South issue.


  8. Or is this all just more theatre? Or is it just another kick of the can in the hope that we can all last out until the good times (growth) come back? Regardless of that, even if it does happen it is not actually offering a long term, viable solution.

    If it goes as is suggested and Greece effectively has their debt forgiven and lots of ackers to distribute to the already rich elite what then? Ireland will start screaming we want debt relief (at least they have a real case to call for it) and so will Portugal. Fair enough, they can be told to F Off, but Spain can’t, nor can Italy, so what then? We already know there isn’t enough money to either bail them both out or forgive their debt, nor would there be public acceptance of it even if the politicians wanted to try.

    As I see it the PIIGS are all bust and short of there suddenly being a global upsurge that drives European growth at 10% a year for a decade, they are going to stay bust unless the Euro collapses, or dies. That simply isn’t going to happen. The BRICS engine has stalled and looks likely to have a very hard, recessionary landing. Europe, the UK and the US are doing the same as they have since the 2009 ‘recovery’, which is bouncing along on the border of recession, even the awe inspiring (according to the MSM) German growth is getting more and more anaemic and she is likely to be in recession by the end of the year.

    Like it or not, at the end of the day Germany IS going to be the last man standing, although by then probably only on one leg, and the choice will be between hopping away (from the Euro) or throwing herself into the burning building to save the folk sheltering in the basement just as the roof is collapsing. My money (if I had any) would still be on their cutting and running.


  9. IMO people have failed to realise how resiliant the Euro actually is. It has 2 behemoths/barbarians at its gate (U.S/U.K) and whilst yes all this can kicking has destroyed Greece, there is mounting evidence that the US/UK has had alot more to do with the attack on Greece than is mentioned!!!


  10. It’s worth noticing in all of this that the eurozone as a whole actually ran a trade balance surplus of €14.9bn in June, a massive improvement compared to last year. In May, the surplus was €7.1bn. All the problems, big as they are, are within the zone, while the zone as a whole is doing well compared to the rest of the world. The problems should therefore really be solvable, one way or another.

    The most politically palatable solution is probably to unleash the Draghi after all, and let him print the debts away. This will steal from the haves and give to the have-nots (or rather their creditors) by means of inflation, which is unpleasant but still easier to get past the voters than for Germany and other “haves” to actually donate the money outright. But in order to agree to this, the Germans will no doubt (fully justifiably) demand to be given a veto (via Brussels) over the budgets of the “have-nots”, to ensure that austerity and reform is continued. Otherwise, there would be nothing to stop the casual spenders from doing the same thing again. A slight, unfortunate side effect to this veto is the death of democracy in Europe. Ah well, if you want to make an omelette…

    From a purely economic point of view, ignoring such trifles as democracy and national sovereignty, this makes the European future look fairly bright. They can do a one-time-only “big print to end all prints” and be done with it. Since the zone runs a trade surplus, and since a delightful new mechanism will be in place to keep profligate nations on a tight Brussels leash, after printing away the debts all will be rosy, and the eurozone will be a thriving and well-functioning economy.

    Compared to this, the US is in a much worse state. They have to print just to keep paying for their galloping deficit. If all debts were to magically disappear, they would still have to keep printing, since they’re unable to make ends meet. The private sector may be cutting down and getting leaner and meaner, but the spending monster that is the US government just keeps on expanding, and is clinically incapable of austerity. The only thing that keeps the US from an instant collapse is that the rest of the world still accepts newly printed Bernanke Bucks as payment. When that stops, that’s the end. Thus the US, unlike the EU, doesn’t have its future in its own hands, but is completely dependent on outside help. That must be a terrible and humiliating predicament to be in for the greatest superpower that the world has ever seen. What this fatally wounded beast will do to the world in its death throes is the one thing to really fear.


  11. This is well put.

    “From a purely economic point of view, ignoring such trifles as democracy and national sovereignty”…
    – This needs to be looked at as it is a major problem…

    “What this fatally wounded beast will do to the world in its death throes is the one thing to really fear.”
    – All it has left is war, it cannot do anything else… and to think an empire lost only after 100 years!!! Good riddance


  12. Expect an SIV with structured debt backed by the gas/oil assets off shore and on shore and those wonderful minerals which are so necessary in todays technology.If Europe does not do this,expect israel to be using this gas/oil and minerals in their own export driven high tech businesses.
    Greece not only has strategic position but these minerals/gas and oil can be a god send.Incidentally,bulk ship carriers are going bust in Germany whilst Greeks,in name only,ship owners are buying these new ships from Germans at tenths of pennies in the Euro,the money being borrowed from Greek banks-how?


  13. Again, we hear all about the Greek resolve to comply with certain conditions to sustain their alms pipeline. We have heard all this before, we have heard the mumblings and watched the tears and in the End, the Greeks will just keep their phony Nanny State-Soviet-Inspired government.

    Abandon hope. Get out of bonds, fast.


  14. Some data from Petrofin Bank Research 2011 (
    The overall Greek loans (drawn and committed but undrawn) booked both in Greece and worldwide for 2011 rose from $66.235bn to $67.694bn, representing a growth of 2.2%.
    From that, only ~ $14 bn comes from Greek banks.
    RBS remained the market leader with $11.455bn.
    Commerzbank-Deutsche Schiffsbank, Credit Suisse*, DNB, and DVB are, together with RBS, the top five.

    Most of the Greek maritime companies have adequate (or even more that adequate) cash flow. In some cases where bank funding was difficult (smaller maritime companies), their owners decided grab lucrative bargains by paying in cash!


  15. GD
    Oddly enough, rampant inflation would HELP ClubMed, being an effective devaluation of the euro. But (a) it would help Nordeurope even more (b) it would make raw materials horrendously expensive and (c) along with global fiscal meltdown, it would turn into hyperinflation which rapidly kills all things social, economic and political.


  16. @ Borg’
    Maybe a flaw in your last para is that the US is by far the EU’s biggest customer (17%) and imports twice as much as the next, China. So what happens to EU’s trade figures if the Yanks stop buying?
    Maybe, globally, we are all in it together.


  17. Thanks for those pearls of wisdom …..In view of (c) I think I’ll stick with the Large Brandy rather than popping Champagne corks on the day the Printing Presses seriously begin to roll !


  18. Surely it’s a misconception that inflation helps indebted people/nations insofar as it’s based on ever growing incomes dealing with debt of a lesser value. The thinking (if any) falls apart when incomes are stagnant or even worse dimished as the Argentinian populace found out.

    It sounds like a strategy put forward by someone who seriously believes QE has had no effect on pensions regardless that pension payments (whether annuities or income drawdown) is inextricable linked to the 15year Gilt rate.

    Are all bankers wankers or just the ones we’re blessed with?


  19. Watch out if the vote doesn’t pass through the German Court! also if it does pass, will the ESM be enough for Germany to feel comfortable enough to give Greece the BOOT??


  20. but Graham, What would debt forgiveness do to your pension and savings?
    Who would end up holding the tab? I don’t think there is any isolation from global economics.


  21. Agreed – but it’s all they can do now………print print print……..and they will :)

    Looking forward to the time I can take a weeks dosh (or hopefully less) to the building society and clear my mortgage :)

    I reckon if at all possible it would be a good time to buy land and property with borrowed money – and wait :) But I could be wrong :)

    Saying which – I should add that I have had a letter increasing my mortgage interest rate. The reason given is that Santander is unable to borrow money cheaply enough to keep the rate as it is…………one has to assume that it has ‘issues’ if its borrowing rate is increasing ?


  22. 12 September,German constitutional court,Dutch elections.8 october,EZ finance meeting on Greece.18-19 OctoberEU summit in Brussels.29-31 October,20.3bn EUR Spanish government bond redemptions,Italian government bond auction.1 November,Eurozone rechristened ‘South A merica 1970’.


  23. Borjesson………….The undemocratic EU cheers as a major consumer of EU goods (USA) bites the dust, did I get that right?

    We are all in this together but if things fall apart I’m much more comfortable living in the Mad Max of the USA than of Europe.


  24. Don’t know why the Germans just don’t take over Greece and be done with it. I know – ‘been there, done that, got the T shirt’. But it would end up being easier all round.


  25. @Borg “A slight, unfortunate side effect to this veto is the death of democracy in Europe. Ah well, if you want to make an omelette…”

    Most states are likely to discover the Bauernomelette indigestible.


  26. John, you get more amusing by the hour!
    I’m now finding myself tuning in, not for my insatiability for more doom, but for your wit. I am a better person for it too – thanks.


  27. A more likely side-effect is the co-ordination of electoral timetables across the EU.
    To date, all the efforts to contain the Eurozone crisis have been hampered and compromised by the proximity of election dates in various member states. With so many members, it is inevitable that crucial elections will be close whenever a crisis occurs, thus compromising its resolution.
    I expect all national elections first to be standardised on a fixed five-year cycle (we’ve just started it, remember), then those cycles will be brought together in a single year, possibly even a common week.
    That way, any future crisis is likely to be an average of two and a half years away from any national election, thus giving the Brussels Mafia the ‘democratic’ freedom (i.e. freedom from democracy) to enact whetever terrible plans they may concoct.
    This is only one of the lessons being learnt from the current crisis. “It’s democracy, Jim, but not as we know it.”


  28. James E: “IMO people have failed to realise how resiliant the Euro actually is. It has 2 behemoths/barbarians at its gate (U.S/U.K) ”

    And because of the above, may I mention four words: Race to the bottom!


  29. It’s not looking good for the EZ at the moment. Facing reality is not in fashion except among some sectors of the northern population, and they are being sold down the river by Merkel who, like Hollande, wants a federal EU at any price. Continuing avoidance of the issue of cultural differences is likely to result in a big bust of some kind, if only a crisis in Germany when the electorate wakes up and realises what Merkel has committed them to, indefinitely. You can fool some of the people…

    The key to all this is the culture of the south. The Germans will not be able to change it, at least within a couple of generations. Indeed, they may end up changing Germany. Having spent decades there, speaking several Latin languages and working in several businesses, I can tell you that cheating, naked self-interest, beggar my neighbour, utter disregard for the future, empire building, bribery and corruption and the gross misuse of EU funds are endemic. Same as the UK, except for the last (as we hardly get any).

    This is the crux of the problem. See Samaras and his two-faced game playing with the EZ. Gimme the money or else! I think we should try else.


  30. Lets not forget -PIGS economies went down the tubes in the good times.Trading thier way out of trouble with a shed load more debt than they started with and in bad times is just not going to happen.


  31. Pingback: GREEK SOURCES: ‘Troika deal won’t be enough to save New Democracy’ | A diary of deception and distortion

  32. Pingback: John Ward – Greek Sources : ‘Troika Deal Won’t Be Enough To Save New Democracy’ – 24 October 2012 | Lucas 2012 Infos


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